Pipeline puzzles on the Balkans – “South Stream” is dead, long live “Turkish Stream”

On 7 April the foreign ministers of Greece, Turkey, Serbia, Macedonia, and Hungary met in Budapest to discuss plans for cooperation in the energy sector. A common declaration was signed whereby the first diplomats of the five states agreed upon the need to improve energy security and develop an alternative gas supply route through South-East Europe and Turkey thus enhancing the friendly relations in the shared neighborhood.

However, the only country from this common neighborhood which was effectively excluded from this summit was Bulgaria. Sofia did not have a single representative at the meeting. Considering the country’s key geographical location in the region, this can hardly be considered any coincidence.

We should recall that on 1 December 2014 while visiting his Turkish counterpart in Ankara, the Russian president Vladimir Putin unilaterally announced to the world that Gazprom’s “South Stream” pipeline will be discontinued in favor of a new project called “Turkish Stream”. He went even further by suggesting that the reason is Bulgaria’s constant indecision backed by the European Commission’s demands for the project to satisfy the Third Energy Package legal framework. True to his style, Putin even sarcastically remarked that Sofia should be looking for compensations from the EC as Bulgaria has lost a deal worth 200 billion Euro.

This statement immediately raised eyebrows in Sofia as no official notification had been received informing of such a decision. Critics of the government of Boiko Borisov and some pro-Russia leaning opposition parties used the moment to depict the situation as a catastrophe. At the same time, pro-Western figures in the ruling coalition expressed their content that “South Stream” would be terminated as it was an unrealistic, tacit, and overly expensive project with vague benefits to the country and the EU as a whole.

Considering all the above, there are two more points which require further attention. One is the recent visit of the new Greek prime-minister Alexis Tsipras to Moscow at which one of the main topics of discussion was namely “Turkish Stream” and its dimensions on Greek territory. The second point is the surprising fact that none of the Bulgarian authorities or stakeholders to the “South Stream” project have so far received any official notification of the pipeline’s termination. The only side that was officially informed of this was the Italian energy giant ENI, which would have been the final recipient of the blue fuel.

Pipeline chess?

The summit in Budapest should be seen as an attempt to reshuffle Moscow’s positions in the Balkan region. The deliberate exclusion of Bulgaria should serve as warning. In a sense, the country is to be made an example of how the benefits to an important infrastructure project were wasted due to the fact that “small and poor” Bulgaria gave in to EU pressure and blocked the construction of “South Stream”. The story is designed more for the domestic audience rather than the international scene. Russian media has been portraying Bulgaria as a victim of the EU for years – the economic and demographic crisis looming in the country is shown as a main consequence from EU membership and loss of competitiveness. So, the arguments thrown against Bulgaria completely fit into that official line of propaganda. Moreover, many advocates of a pro-Russian choice in Bulgaria happily took on the role to actively portray the end of the pipeline project as another geopolitical disaster that struck Bulgaria because of its EU membership.

Furthermore, deliberately ignoring Bulgaria for the Budapest summit and at the same time still not providing an official note of the termination of the “South Stream” pipeline is meant to show the Bulgarian government that they are, from Moscow’s point of view, rather insignificant and the country is no longer seen as reliable, at least in the short term. The Kremlin’s official dealings with Bulgaria will be taken to a sanitary minimum while the informal proxies of Russian influence (some political parties, media, and public figures) will be encouraged to increase their voice.

The Kremlin plays its cards in such a way in order to demonstrate its superiority adhering to the old adage “divide and conquer”. If “South Stream” cannot be built because of the EU’s position expressed by member state Bulgaria, then Moscow’s interests will go around the country – if Bulgaria will not be the “ally”, then other countries can be. The new “Turkish Stream” project will go through Turkey, Greece, Macedonia, Serbia, and reach its hub in Hungary. Clearly, the pipeline circumnavigates Bulgaria from the south increasing the total length of the project and certainly its costs. However, three new countries jump onboard – Turkey, Greece, and Macedonia. While Moscow was only dealing with Bulgaria, Serbia, and Hungary for the Balkan section of “South Stream’, now it will have to accommodate the interests of five states in the “Turkish Stream”.

Where is the benefit for the Russian side in increasing the parties to the project?

First of all, three countries – Turkey, Serbia, and Macedonia – are not EU member states and as such Brussels’s reach over them is not so direct. At the same time the three countries are formally granted the status of “candidate states”. This makes them very important focal points on the Balkans for Russian interests. As the countries are not fully integrated with the EU, the Kremlin still has the opportunity to secure its spheres of influence there. In both Serbia and Macedonia pro-Russian sentiment is strong while Turkey is quite disenchanted with its EU ambition after more than a decade Erdogan rule. Clearly this is a favourable climate for increased economic and political cooperation with Russia.

More controversial examples are Hungary and Greece both being EU member states. Viktor Orban’s government in Budapest has earned the reputation of being a kind of “Russian Trojan horse” over the past years. Orban has reputational problems in the eyes of his European counterparts and certainly has been at odds with the European Commission on many occasions. Orban’s Hungary feels it is not directly threatened by any Russian expansion (since its geographically not on the “frontline”) and thus tries to extract as much economic benefit as possible, a position mutually embraced by Russia.

Greece is, on the other hand, the new player in this game. The prime-minister Alexis Tsipras’s election promise was to return dignity to Greece and solve the economic crisis – very formidable task. After Tsipras’s attempt at debt renegotiation with western creditors stalled and only increased the gap between EU politicians and “Siriza Greece”, naturally the pendulum swung to the east. Tsipras flew to Moscow expecting easy money for his troubled economy but received mostly offers to buy up assets in Greece. Most tentative result was the mutual agreement that “Turkish Stream” would be beneficial for Greece. Once this last element of the puzzle is in place, “Turkish Stream” is even closer to existence, at least on paper.

What are the implications for the EU?

Dealing with three candidate states and two member states, Russia continues its policy of bilateral agreements challenging the unifying role of the EU as a whole. The Western Balkans are the only region that effectively represents a “backyard enclave” for the EU as its is not still integrated fully in the union. This creates an ideal opportunity for Russia to develop links with the region before it ascends to the EU in the future (if ever). As of Hungary and Greece, the Kremlin is well aware of the domestic problems of these states and the fact that both leaders are not well received in the EU circles. Since there is hardly any vacuum in politics, unhealthy relationship with one side creates opportunity for the other.

In reality, Gazprom probably took the decision to terminate “South Stream” through Bulgaria as it was not ready to accept the Third Energy Package. The Bulgarian government backed by Brussels made it clear after all that the project needs to satisfy EU legislation in order to continue. So, in a surprise move Putin announced the termination of “South Stream” and threw the guilt at Bulgaria as it would have been difficult to save face and confess that the project is no longer feasible on Gazprom’s terms.

Therefore, when it comes to “Turkish Stream” it is imperative that the EU takes the same firm position as it did for “South Stream” in Bulgaria. Both Greece and Hungary should be compelled to dictate the same requirements to Gazprom. Moreover, the three candidate countries should also be held accountable to the Third Energy Package. In other words, if the EU would allow the Kremlin’s flanking manoeuvre to succeed it would seriously jeopardize its credibility to act as a united single actor in foreign and energy politics. Bulgaria will really increasingly look like “the fool” which would directly play into the hands of Russian anti-EU propaganda.

There has not been any official response by the EU yet as most of the preparations around “Turkish Stream” remain on the level of discussions. If the pipeline will actually come closer to materialization, the EU must come out with a common, clear, and formidable position – its legislation must be respected by all member states. If the EU fails to do so, this would just illustrate another failure of the “acquis communautaire” and the de facto weakening of Europe.